Crunch Time for Social Security

August 7, 2003

The distant trust fund exhaustion date of 2042 given in the 2003 Social Security Trustees' report unduly detracts from Social Security reform. However, as Bert McLachan, Texas chair of Social Security Choice.org explains in an op-ed for the Austin American-Statesman, the "Social Security Problem Is Closer Than You Think."

McLachan writes: "The recent reports of the trustees of the Social Security retirement fund resulted in headlines about Social Security being 'slightly stronger,' mainly because its 'projected insolvency date was extended to 2042, one year later than what was projected a year ago.' So, with any problems 39 years away, why should President Bush want immediate attention given to overhauling the program?

"As usual, the devil is in the details, mainly in the definition of that insolvency date. The other big point of confusion is the 'trust fund.'

"In 2002, the Social Security retirement fund (OASI) took in $540 billion (mostly by payroll taxes), paid out $394 billion, and supposedly put the remaining $146 billion into that trust fund. That increase brought the fund balance up to a supposed $1.218 trillion. The trustees' reports also show that over the next decade up to one-third ($2.368 trillion) of the money coming in for retirement benefits won't be spent, but will also go into this trust fund, bringing it up to about $3.586 trillion. And this fund will eventually build up to more than $6 trillion, at which time it will rather rapidly be exhausted so that in 2042, it will be possible to pay 'only 73 percent of scheduled benefits.'

"So it is necessary to have the money in that trust fund in order to get to 2042. If it isn't there, we don't get to 2042 and instead might be more interested in the trustees' statement that 'projected OASI tax income will begin to fall short of outlays in 2018.' And, as a matter of fact, 2018 is the middle-of-the-road guess; their pessimistic guess is 2013 as the first year when the income won't cover the checks that need to be written to our nation's retirees.

"That leaves us wondering whether the problem is 39 years away, or might be only a decade away. And it all hinges on whether this 'trust fund' exists. After all, the fund is always referred to in government reports as an asset.

"What actually happened to that $146 billion, collected mostly through payroll taxes last year, that we thought went into a trust fund? It was actually lent to Congress, which spent it all. Congress has spent every penny of the $1.218 trillion of 'assets' that are allegedly in the trust fund, and it is certainly continuing to spend every cent of this supposed retirement fund to cover its own increasing deficits.

"There is no trust fund, other than as a liability of Congress', to pay back the retirement fund when the money is needed. And how can Congress do that, when it has never paid any of it back before? There are only three ways.

"First, Congress can raise taxes by extreme amounts, so as to create big surpluses. Or it can similarly cut spending, which it has never done. Or it can borrow more from the public, thereby passing this enormous, ever-growing bill on to our children, who can try to pay it off (by raising taxes or cutting spending).

"When President Bush says Social Security needs to be overhauled, and Treasury Secretary John Snow adds, 'Inaction is not an option,' we all need to understand why they are right. It is already too late to solve Social Security's problems without real fiscal pain, and continuation of the present program only makes matters worse.

"This is why those who understand these 'details' behind the headlines want to have the right to control their own money, invest it in personal accounts and build real wealth that they can own, as far out of reach of the politicians as possible."

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